Promotors ride it out

IT has been a tumultuous few years for the proponents of managed investment schemes, with some tax-effective products becoming outcasts as industry players try to distance themselves from a spate of bad publicity.

Promoters believe their products stack up because of the underlying fundamental financials of the product, with the tax effectiveness of a product as the cream on the cake.

Investors and promoters have been put under pressure by a change in attitude from the Australian Taxation Office and the removal of the 13-month rule.

Then there was the Budplan court case involving thousands of investors and the ATO, which found last month in the ATO’s favour, leaving investors shortchanged.

Scheme promoters have been forced to quell investor fears by pointing out ways in which their product is different to those that have fallen foul of the regulators.

Great Southern Plantation general manager Cameron Rhodes believes it is now a case of educating investors that things are different.

“Budplan has nothing to do with us. They are completely different things,” Mr Rhodes said.

“We have a completely different structure. We are trying really hard to show people that we have a commercial business.

“If people want to get tax deductions they can give their money to charity. If you want deductions they can give your money away.

“But that would be just illogical.

“Our products are legitimate commercial enterprises. They have commercial merit. Any product has to stand up on its own underlying fundamentals,” Mr Rhodes, an inaugural winner of Business News’ 40 under 40 awards said.

Yet, as Viticultural Asset Management director Mike Calneggia found out, selling a product that is devoid of any tax concessions and reliant purely on a sound business model does not attract bites from investors.

Mr Calneggia was forced to remove a grape growing property trust project last year after no takers came forward. Last week he launched the repackaged product, the Gnangara Vineyard Project, using the tested and tried managed investment scheme formula.

Mr Rhodes would rather see the ATO’s win in the Budplan case as a benefit for the industry because it cleared up and removed uncertainly.

He believes that, if the ATO had lost the case, it would have opened the doors for a whole range of products that would not be commercially viable.

With the air now cleared, Great Southern Plantations is concentrating its efforts on the task at hand – securing its timber supply chain and signing up buyers for its forestry products for when tree cropping begins in earnest in 2004.

While promoters such as ITC and TimberCorp have been diversifying into other agribusinesses, such as almonds and sandalwood, Mr Rhodes feels that, given the Federal Government’s commitment to the plantation industry through its new 12-month rule and its 2020 plantation vision, forestry will perform better over the next decades.

“If you are looking at a tax investment scheme, plantation forestry is the one that stacks up the most,” Mr Rhodes said.

Demand from China and South-East Asia for paper is expected to accelerate over the next few years and Australia is well positioned to supply that demand, he said.

“We are entering an exciting era. In two years’ time when harvesting begins it is going to provide all sort of employment. At the end of the day, harvesting is the most important part,” Mr Rhodes said.

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